Loan pact lessens possibility of white knight for NDTV
The basis of Adani Enterprises Ltd’s arguments lies in a loan agreement signed between RRPR and VCPL on 21 July 2009
PremiumMUMBAI : Adani Enterprises Ltd said on Friday that the contentions raised by NDTV’s promoter entity RRPR Holding Pvt. Ltd are legally untenable and devoid of merit. It asked the broadcaster to immediately fulfil the contract obligation to allot equity shares. Returning the original loan and warrant certificates will have no impact either, it said in a regulatory filing.
The basis of Adani’s arguments lies in key clauses in a loan agreement signed by RRPR and Vishvapradhan Commercial Pvt. Ltd (VCPL) on 21 July 2009, parts of which have been reviewed by Mint.
RRPR, named after NDTV founder-promoters Radhika and Prannoy Roy, holds 29.18% of NDTV and has pushed back against the Adani Group’s takeover bid, claiming a regulatory order prevents them from transferring effective ownership of part of the company’s shares.
As per the loan pact, VCPL has the sole right to convert warrants into shares during the loan tenure or even after.
“At the sole option of the Lender (VCPL), the warrant may be converted, into such number of equity shares at par aggregating to 99.99% of the fully diluted equity share capital at the time of conversion of the borrower (RRPR) at any time during the tenure of the loan or thereafter without requiring any further act or deed on the part of the lender," said the loan agreement.
“Even if the loan is repaid today, VCPL’s rights granted due to the warrants is absolute," said a senior corporate lawyer declining to be named since he advises one of the parties in corporate matters. This means even if RRPR gets a white knight to repay the loan owed to VCPL, it wouldn’t stop the warrant conversion.
The agreement could also cap Adani’s purchase of NDTV shares, by way of the warrant exercise, at 26%. “The lender (VCPL) and its affiliates shall not purchase shares of NDTV which will increase their holding in the aggregate to more than 26% of the paid-up equity share capital of NDTV without the consent of the other parties," says clause 6.3 of the agreement.
“If this clause is taken at face value, Adani could be asked by a judicial forum to pare the warrant conversion to 25.99% of equity share capital of NDTV," said a second corporate lawyer who too declined to be named citing conflict.
However, according to Praveen Raju, partner of Spice Route Legal, this is where the nuance comes into play. “It appears there are certain clauses that give VCPL the absolute right to exercise warrants up to 99.99% of equity in RRPR, which should mean 29.18% of shares of NDTV need to be allotted to Adani group. On the other hand, there is this clause which caps share purchase at 26%. They both need to be read together," said Raju.
NDTV says a November 2020 Sebi order prevents them from transferring shares.
However, Adani Enterprises on Friday said, “[P]erformance of obligations by RRPR pursuant to the warrant exercise notice will not result in violation of the Sebi order as there is no, direct or indirect, dealing in any securities of Mr Prannoy Roy or Mrs Radhika Roy pursuant to the exercise of the warrants by VCPL allotment of shares by RRPR."
The first of the two lawyers cited above said, “This agreement is between two unlisted entities and predates Sebi order (2020) which makes it highly unlikely that the regulator needs to give a nod for allotment of shares."
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